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Universities unbound: where will campuses without caps end up?

When the cap on student numbers was abolished, England’s universities gained new opportunities to raise funds and grow – so how have they reacted?

Back in December 2013, chancellor George Osborne announced he was abolishing the limit on the number of full-time undergraduate students in England. In 2014, there would be room for 30,000 extra students; in 2015, with the cap gone altogether, the rise was expected to reach 60,000.

Some feared expansion would lead to universities being underfunded and that quality would fall. At the time, Wendy Piatt, director general at the Russell Group of 24 research-based universities, said “quality higher education should be prioritised over quantity, especially in times of limited funding”. And, with the cap removed only in England, there was concern that universities in other parts of the UK would find it harder to recruit students.

Two years on from the announcement, the early signs are that the chancellor’s projections were optimistic. In 2014, the number of students taking university places increased by 16,000, while 2015 saw a further increase of 13,000.

Steven Jones, a senior education lecturer at the University of Manchester, says: “The government’s targets were always ambitious. Prior to the removal of the cap, there weren’t tens of thousands of students unable to find a university place.”

Expansion plans are not being helped by a demographic dip: over the next five years, the number of 18-year-olds is expected to fall, although it will start to rise again in 2020. Nonetheless, some commentators believe an eventual rise in student numbers is inevitable. Nick Hillman, director of the Higher Education Policy Institute, argues there are three factors to consider.

The first concerns the international experience: when Australia removed its cap in 2012, the country saw growth “in every discipline area, every socioeconomic group and every type of university”, Hillman notes.

The second is history: “If you look at any graph of student numbers in the UK in recent decades, from the Second World War onwards, it’s a line going upwards,” he observes. The UK sends 38% of its cohort to university, putting it, says Hillman, in the middle of the OECD league table for higher education participation rates.

Finally, there has been a rise in aspiration: Hillman cites the Millennium Cohort study, a longitudinal study of children born at the turn of the century, which found that 97% of mothers wanted their children to go to university, with almost no variation between mothers of the highest and lowest social classes.

If an increase in demand is on the cards, what about supply? Some universities are highly unlikely to expand: Oxford and Cambridge, already relatively wealthy, have no incentive to dilute their elite status by taking more students. Some others at the top end of the Russell Group may take the same view; when the removal of the cap was announced, several told The Guardian they had no plans to expand – although UCAS figures for 2014 indicate some of them did go on to increase their intake.

Institution-level figures for 2015 have not yet been published. However, admissions data for 2014 shows that, while 40 of the 100 biggest universities in England took on broadly the same number of students as a year earlier and 15 reduced their intake by 5% or more, 45 universities increased their numbers by 5% or more. Several, among them Essex, Surrey, Liverpool, Derby and Reading, increased their intake by substantially more than 10%.

Essex said in 2012 that it would expand its undergraduate intake by 50% by 2020. At that time, universities were already allowed to take an unlimited number of overseas students. Jules Pretty, deputy vice-chancellor, argues expansion makes economic sense: “If you want to be able to create surpluses to reinvest in students and research and the estate, then you’ve got to increase the income base, and that means either increasing fees or increasing volume and, of course, volume is the best answer.”

The increase in Essex was across the board, with demand for humanities continuing to hold up despite the hike in fees to £9k in 2012. Pretty notes that the 10 universities with the biggest increase in student intake in 2014, of which Essex is one, are a strikingly diverse bunch. Suggestions that expansion might all be from the least prestigious universities taking the least well-qualified students have not – yet – been borne out.

Pretty is confident that Essex will be able to expand without diluting quality. He notes that in parts of Clacton, for example, fewer than 10% of 18-year-olds go to university, representing a “market opportunity” for the university. “It’s a mistake to assume that quality is only defined by A-level grades and tariff points,” he says. “Capability is actually much wider than that. We can work with schools where students are disadvantaged by background, income, culture and school quality, and we will look at that and say: ‘We can turn you into a very effective student.’ We don’t change our admissions policy in any way for different groups, but we have an admissions policy that understands the market.”

His view dovetails with the government’s commitment, announced in November’s green paper, to doubling the proportion of disadvantaged young people entering higher education by 2020 from 2009 levels. The Office for Fair Access (shortly to be subsumed into the new Office for Students) has set targets for universities to increase the number of students from such backgrounds entering in 2016/17. These targets, says Colin McCaig, principal research fellow at Sheffield Hallam University, allow the most prestigious universities to keep entrance requirements high for most courses while adding programmes aimed at less well-qualified students. “Expansion would allow a little bit of manoeuvring where universities could just create a different subject area or different programme aimed at that cohort, without it affecting their other courses,” he says.

However, Jonathan Clifton, associate director of the public service reform team at the Institute for Public Policy Research, worries that expanding full-time undergraduate places at the expense of less lucrative types of study could undermine attempts to widen access: “We’ve seen that universities are ditching a lot of their other types of provision – part-time, mature, the more technical vocational higher education – and those are the sorts of courses that can do most for social mobility.”

The green paper Higher education: teaching excellence, social mobility and student choice published in early November does nothing to address the drop in students studying part time. It does, however, declare the government’s intention of making it easier for new private providers to enter the market and for existing ones to expand. Clifton believes this could have a detrimental effect on students: “In the US, a lot of private universities have just taken all the money coming in from loans, offered quite poor-quality higher education, and then many of them have then gone bust. The biggest losers are the students who have taken out these big loans.”

If universities continue to expand, we could see more and more students ending up with debts of £40,000 (covering living costs as well as tuition fees), all chasing the same pool of jobs. As professor Alison Wolf pointed out in a report earlier this year: “Actual concrete payoffs to many degrees are plateauing and more graduates are in ‘non-graduate’ jobs.”

It is possible some students will take a pragmatic approach, staying at home and taking a degree at their local further education college, particularly as the means-tested grant for students from lowincome families is being abolished. Nick Davy, higher education policy manager at the Association of Colleges, believes it may take a few years for the impact of large loans to hit home: “That’s when those on average and lower incomes will increasingly look at a local option.” Already, he says, some FE colleges in towns without a university have been very successful in offering some form of higher education, even if only in niche areas, to “meet the needs of a local occupational sector”. Competition to universities may also come from the proposed institutes of technology.

The difficult question for the government is how expansion will be funded. The initial estimate, based on 60,000 extra students, was that it would cost an additional £700m a year. Privatisation of student loans was initially expected to provide the cash, but a planned £12bn sell-off of loans taken out between 1998 and 2011 was scrapped in 2014. The notion could be resurrected. The face value of student debt in England currently totals £64.7bn, although any sale would be for a lot less than that. “If vast numbers of students turn up, maybe then you do have a debate about the consequences for funding,” says Hillman.

The government will also have to tackle the question of unpaid loans. If more students enter higher education, and there is no concomitant increase in well-paid graduate jobs, the proportion of loans that are never fully repaid will increase.

Its current plan, as set out in the green paper, is to introduce the teaching excellence framework (TEF), which will link teaching quality to financial incentives. The government will set a new maximum fee cap (as yet undefined), and institutions that perform well in the TEF will be entitled to raise their fees in line with inflation up to this amount for new students from 2017. This potentially brings its own problems, says Clifton: “If you lift the £9,000 cap on fees, the government has to issue bigger loans, so the outlay on loans will increase.”

The TEF reforms, argues McCaig, will have less influence on fees than the new rules relating to private providers: “The new regulatory framework will make it easier both for new providers to get degree-awarding powers and for existing providers to fail as businesses, because they will no longer be subject to a public interest decision by the secretary of state. The aim is to create more competition and eventually lower average fee levels at the margins of the system.”

Clifton fears the expansion of higher education is likely to mean the axe will fall somewhere else: “If the government ends up putting all their money into subsidising student loans – and we know they keep increasing the amount they estimate they have to subsidise students – that just means they have to make cuts elsewhere in the BIS [Business, Innovation & Skills] budget. Further education was cut enormously over the last parliament and we’ll probably see that in the Spending Review again.”

As yet, the data available gives few clues as to the long-term impact of removing the cap – whether universities will choose to expand, whether demand will continue to rise, whether some providers will be squeezed out altogether and whether quality will fall. The most optimistic prediction comes from Hillman of the Higher Education Policy Institute, who thinks universities shouldn’t fear the impact of competition: “This is not just a battle for the same number of students – this is a bigger cake all round.”